Costa Mesa agrees to settle affordable-housing lawsuit over Motor Inn redevelopment

After a legal battle lasting more than two years, the city of Costa Mesa and the company behind a plan to demolish the shuttered Costa Mesa Motor Inn to make way for an apartment complex have agreed to settle a lawsuit by an affordable-housing advocacy group that alleged the proposal violated state law.

The agreement clears the way for the motel’s owner, Miracle Mile Properties, to move ahead with redeveloping the site at 2277 Harbor Blvd.

The terms also require the city to pay roughly $1.3 million in legal and other costs and to explore options to develop new affordable housing locally.

Deputy City Attorney Tarquin Preziosi announced the settlement at the beginning of Tuesday evening’s City Council meeting.

The wide-ranging pact, a copy of which the Daily Pilot obtained Tuesday afternoon, also effectively ends two lawsuits filed in 2014 challenging a city ordinance limiting long-term stays in local motels.

Per the agreement, Miracle Mile will scale down the new complex from the originally planned 224 units to no more than 200 and designate nine units for 55 years for people with very low incomes.

In a statement Tuesday, Mayor Sandy Genis said she was “glad a mutual settlement was achieved in a way that makes available some financial assistance to former Motor Inn residents and adds more affordable housing in our city.”

“I am pleased we can put this behind us, get rid of a closed, dilapidated motel that has become an eyesore and attractive nuisance along Harbor Boulevard, and importantly reach a beneficial settlement for the litigants and the community,” she added.

Councilwoman Katrina Foley said she hopes “we can avoid this type of costly litigation in the future by working more collaboratively with interested stakeholders.”

The council originally approved the Motor Inn redevelopment in 2015. However, the project ran into legal hurdles when the Kennedy Commission — an Irvine-based affordable-housing advocacy group — and some then-Motor Inn residents filed a lawsuit in January 2016 alleging the city had approved it without providing relocation plans or appropriate assistance for the low-income residents who would be displaced.

In May 2017, Los Angeles County Superior Court Judge Mary Strobel reversed the city’s approval of the project, ruling the proposed development of high-end apartments did not conform with state density bonus law, which allows developers to build more units on a property than originally permitted if a proportion of the new units is set aside for low-income residents.

By that point, all the Motor Inn’s residents were gone. The motel officially closed in November 2016.

The settlement agreement also stipulates that:

• Costa Mesa will “exercise reasonable best efforts consistent with and as authorized by applicable law” to promote development of affordable housing at the Fairview Developmental Center. The 114-acre state-owned property at 2501 Harbor Blvd. currently provides services and housing to people with intellectual and developmental disabilities but is slated to close in coming years.
• Costa Mesa and Miracle Mile will pay a total of $1.4 million to cover plaintiffs’ attorneys’ fees, with $850,000 of that coming from the city.
• The city and Miracle Mile will place a total of $600,000 in a fund that will be available for former long-term occupants of the Motor Inn. The two also agreed to split the cost — not to exceed $25,000 — for a claims administrator for the fund.
• The city will pay a total of $200,000 to the client trust fund account of the Legal Aid Society of Orange County.
• Costa Mesa will continue reevaluating its ordinance that limits motels’ ability to house tenants for more than 30 consecutive days, or for 30 days in a 60-day period. The City Council directed the Planning Commission last year to look at the matter.

Costa Mesa’s Housing Authority currently owns eight apartment complexes with 30 affordable units on West 18th and James streets. The agreement requires that the city solicit proposals for the “continued operation of these properties as long-term affordable housing for another 55 years,” according to a city news release.

Kennedy Commission Executive Director Cesar Covarrubias called the settlement “an important and necessary first step for Costa Mesa to foster the development of its fair share of affordable housing.”

“To solve the state’s profound affordable-housing crisis, every city must do its part,” he said in a statement Tuesday.

Miracle Mile President Frank Menlo said the company looks “forward to finally delivering 200 units of much-needed housing for the Costa Mesa community.”

“In the midst of the state’s worst housing crisis, our privately financed project will also include nine very-low income apartments that will provide homes for some of Costa Mesa’s most needy families,” Menlo said in a statement. “It is unfortunate that certain legal maneuverings by a small group for personal gain only delays critical development and increases the costs of housing for everyone. We value our continued relationship with the city of Costa Mesa and its leadership and are eager to break ground soon.”

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UPDATES:

8:10 p.m.: This article was updated with additional details and with comments from Sandy Genis and Katrina Foley..

This article was originally published at 5:40 p.m.